Why Nektar Therapeutics' Shares Tumbled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of clinical-stage biopharmaceutical company Nektar Therapeutics (NAS: NKTR) dove 13% on Monday after the company received an analyst downgrade from Jefferies and unveiled late-stage results for its opioid-induced constipation drug, Naloxegol, that was developed in collaboration with AstraZeneca (NYS: AZN) .

So what: Earlier on Monday, AstraZeneca reported positive phase 3 trial results for Naloxegol with regard to opioid-induced constipation, noting no adverse side effects with the drug, including no clinically relevant cardiovascular events during trials. This comes in direct contrast to the Food and Drug Administration's recent stance on opioid-induced constipation, or OIC, drugs. Salix Pharmaceuticals (NAS: SLXP) and Progenics (NAS: PGNX) disclosed last week the need to do a large, long-term safety study on the effects of their OIC drug Relistor because of safety concerns raised by the FDA. These concerns from Nextar and AstraZeneca's peers led Jefferies to downgrade Nektar to "hold" from "buy" and lower its price target by 20% to $8, albeit that was before its clinical data was released.

Now what: Nektar has a relatively robust pipeline of collaborative agreements, so its pocketbook won't be hurting for a while, but investors have to be getting tired of either safety concerns or poor drug launches spoiling their performance. Nektar, for instance, receives royalties from Affymax's (NAS: AFFY) recently approved anemia drug Omontys, whose sales have been less than impressive thus far. Given the sheer scope of its trials, I happen to like Nektar's long-term outlook, but I'd temper your near-term expectations.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.